Ivor Edwards, Clyde & Co, London says: Brexit planning will accelerate and Insurance businesses across Europe will make their moves
The actual timing of the triggering of Article 50 in 2017 will be of little consequence to insurance companies. With a carrier company taking nearly two years to set up, insurers haven't waited and are already well underway in planning for Britain's exit from the EU. It is worth remembering that it is not only those in the UK that are affected; there are over 550 general insurance companies headquartered in continental Europe who passport into the UK (some of those on a branch basis) that have been considering their options.
The biggest issue to consider is whether the size of the business, or its potential for growth and profitability, warrants the establishment of a locally-authorised branch or subsidiary in another EEA country, a fronting arrangement, or the acquisition of an existing business. The decision not to continue operating within the EEA will require a plan to run off the existing business through a sale of the renewal rights and / or the transfer of historic portfolios.
Another issue under consideration concerns existing European distribution arrangements. It is vital that businesses undertake a review of all their distribution arrangements to see whether services are being provided to, or received from, a third party using EU passporting rights. If they are, decisions would need to be made about how these arrangements operate after the UK withdraws from the EU.
Leaving the EU will lead to many complex changes taking place and for this reason we predict insurers will be rapidly developing their post-Brexit strategies in the coming months, with plenty of announcements likely to be made through 2017, whatever the outcome of Brexit negotiations.
Vikram Sidhu, New York says: US insurance M&A activity will decrease during 1H 2017 due to uncertainty about the Trump administration, however, deal-making in the sector should come roaring back in the second half of the year.
On January 20, 2017, Mr. Donald Trump will become President of the United States, promising a dramatic departure from recent US public policy on many fronts. During the first half of 2017, there will remain considerable uncertainty for insurance dealmakers, but deal activity should return to high levels during the second half of the year.
The key factor leading to decreased deal activity during the first part of the year will be uncertainty about the Trump administration’s policy plans, particularly on economic and trade matters. For instance, Mr. Trump has called for potentially revisiting existing trade agreements, which tend to cover trade in financial services and cross-border investments, and has made comments against certain countries such as China. Such uncertainty about what President
Trump might do and the potential retaliation by other countries (in the event that the United States under President Trump seeks to unilaterally impose trade barriers) is likely to chill acquisitions by non-US acquirors of targets in the US insurance industry. Similarly, even US parties considering US targets will also likely postpone deal-making until there is greater clarity about the Trump administration’s economic policies.
However, the Trump administration and the Republic Congress together are expected to decrease financial regulation (although insurance is regulated almost exclusively at the state level), implement pro-business economic policies, and reduce taxes for businesses, which are expected to lead to a growing economy and rising stock markets. Those factors should lead to an increase in insurance M&A deal activity during the second half of 2017.
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